As of now, the smartphone arms race is really about two players: Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG). Each has a popular core operating system, which help guide the industry and provide tremendous power and profits.

I guess Facebook feels left out of the action.

So, it looks like Zuck & Co. will partner with HTC for the development of the handset, which will use a modified version of the Android operating system (Jelly Bean). This will make it possible for the main Facebook services — like the social network, Instagram and Messenger — to show up on the home screen when a user turns on the phone, which should boost usage and allow for more opportunities to generate ad revenues.

While all this sounds good — in theory — it may be tough to pull off. It seems questionable that consumers will buy a phone because it has the Facebook brand emblazoned on it … and if anything, that may be a limiting factor. Most users want smartphones because of the diversity of applications — such as Snapchat, YouTube, Vine, Zynga’s (NASDAQ:ZNGA) Poker, Google Apps, Twitter, LinkedIn (NYSE:LNKD) and so on. Few want apps from just one vendor.

Besides, the smartphone market is already glutted with options, including Microsoft (NASDAQ:MSFT), Nokia (NYSE:NOK) and BlackBerry (NASDAQ:BBRY), to name a few. Even those household names have had trouble getting much traction.

Then again, if the Facebook phone fails, it will not be a big loss. The investment will likely be minimal. There will be no licensing issues and the modification to Android is slight.

But the Facebook phone is a sign of something more ominous: The company has not displayed much pizazz lately. Instead, Facebook seems to be mostly knocking off other properties, as it did with it’s attempt to imitate SnapChat with Poke. Or it has simply launched new products that are mostly enhancements, including Graph Search.

In fact, it looks like Wall Street is worried. Even though the markets have been particularly strong in 2013, the shares of Facebook have lost over 4% so far.

In the end, Facebook’s phone might not be about the phone at all. Instead, the company’s new product could be just another example of how it is losing some of its innovative touch.

Based in Silicon Valley, Tom Taulli is in the heart of IPO land. On a regular basis, he talks with many of the top tech CEOs and founders trying to find the next hot deals and finding out which start-ups are stinkers.

A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.

Tom is routinely quoted in the media about upcoming deals with his interviews on CNBC and Bloomberg TV, but he is eager to take your questions too. You can message him on Twitter at @ttaulli. And feel free to weigh in via the comments section on any of his IPO Playbook posts.